Diesel prices to be hiked by 40-50 paise every month: Moily

A file photo of oil minister M. Veerappa Moily. Diesel is currently sold at a loss of over Rs.10.80 per litre. Photo: Pradeep Gaur/Mint

Updated: Fri, Feb 01 2013. 07 25 PM IST

New Delhi: Petroleum minister M. Veerappa Moily said Friday that diesel prices will be increased by 40-50 paise per litre every month, in the wake of the government removing it from the purview of the administered price mechanism.

“Until further orders, oil marketing companies (OMCs) can increase it by 40-50 paise every month,” Moily told reporters in New Delhi.

While the announcement comes in the backdrop of the United Progressive Alliance government’s willingness to address fiscal correction and send the right signal to rating agencies, the move won’t be popular and could provide a fresh inflationary impetus.

According to the petroleum ministry, the OMCs lost Rs1.24 trillion (until December 2012) on account of selling diesel, kerosene and cooking gas at government-fixed prices. They lost Rs73,815 crore on account of diesel. The OMCs lost Rs1.38 trillion in the last fiscal from selling fuels below cost.

Meanwhile, the government may crack down on bulk consumers of diesel, which need to pay market prices, buying it from retail pumps directly to save on costs.

Moily referred to the public transport fleets of states such as Gujarat and Tamil Nadu refuelling at retail outlets instead of bulk sourcing from the OMCs to save money. Around 15% of India’s diesel is consumed by passenger vehicles.

“We need to look into that. I have also heard about it. We are seized of that matter,” he said.